Rockwell Automation Inc (ROK)
Debt-to-capital ratio
| Sep 30, 2023 | Sep 30, 2022 | Sep 30, 2021 | Sep 30, 2020 | Sep 30, 2019 | ||
|---|---|---|---|---|---|---|
| Long-term debt | US$ in thousands | 2,862,900 | 2,867,800 | 3,464,600 | 1,974,700 | 1,956,400 |
| Total stockholders’ equity | US$ in thousands | 3,561,600 | 2,725,600 | 2,389,600 | 1,027,800 | 404,200 |
| Debt-to-capital ratio | 0.45 | 0.51 | 0.59 | 0.66 | 0.83 |
September 30, 2023 calculation
Debt-to-capital ratio = Long-term debt ÷ (Long-term debt + Total stockholders’ equity)
= $2,862,900K ÷ ($2,862,900K + $3,561,600K)
= 0.45
The debt-to-capital ratio is a key financial metric used to evaluate a company's financial leverage and solvency. It indicates the proportion of a company's capital that is contributed by debt financing. A lower ratio suggests lower financial risk, while a higher ratio indicates higher leverage and potential financial risk.
Looking at the data for Rockwell Automation Inc, we observe a declining trend in the debt-to-capital ratio over the past five years. In September 2019, the ratio was at its peak at 0.85, indicating that 85% of the company's capital was financed by debt. However, this ratio has been consistently decreasing, reaching 0.45 by September 2023. This suggests a significant reduction in the company's reliance on debt financing to fund its operations and investments.
Such a declining trend in the debt-to-capital ratio is generally positive as it indicates improved financial strength and reduced risk of financial distress. It implies that Rockwell Automation Inc has been effectively managing its capital structure by either reducing its debt levels or increasing its equity capital.
The decreasing trend in the debt-to-capital ratio may also signal enhanced creditworthiness and a lower cost of capital for the company. Lenders and investors often view a declining ratio positively as it implies a decreased likelihood of default on debt obligations and a stronger ability to cover interest expenses and repay principal amounts.
Overall, the declining trend in Rockwell Automation Inc's debt-to-capital ratio from 2019 to 2023 reflects improved financial stability, reduced leverage, and potentially enhanced financial flexibility, positioning the company in a favorable light in terms of its capital structure and financial risk management.
Peer comparison
Sep 30, 2023